TELEVISION EIGHTEEN INDIA LIMITED
Analysts' Meet held on MARCH 9, 2000

BUSINESS DISCUSSION | QUESTIONS AND ANSWERS | DISCUSSION WITH COMPANY OFFICIALS | BUSINESS PORTAL LAUNCH

BUSINESS DISCUSSION

PRESENTATION MADE BY MR. RAGHAV BAHL (CEO) :-

• The co. has emerged as one of high quality TV programs contents developer.

• Though the co. is not directly into broadcasting, nevertheless it carries all risks and opportunities that a broadcaster normally has.

• Will soon launch vortal (vertical portal for stocks related business and news)

• Is of the opinion that there is larger programs compatibility between TV and Radio.

• The co. has moved with new technology and trends by successfully upgrading itself from TV software maker to own TV channel for business news broadcasting to launching of business portal.

• Has great plans for internet space.

• The co. is also into cable distribution (through Sony and in cable).

1. CNBC India is a paid channel and hence gets cable subscriptions.

• It is the First Media Co. to offer ESOP 21/2 years back.

1. Overall 10% of equity (Rs. 11 crores) has been reserved under ESOP will not require to further dilute equity so as to offer ESOP.
2. Already 31 employees have been covered under ESOP (180,000 shares issued).

• The central government has to come out with more clear guidelines as to ESOP taxation. Then only the co. will re-fashion its ESOP schemes, options, bonus etc.

• Presently employees trust holds 10% of paid up capital of the co.

• Promoters holding in the co. is low at 26% primarily because they being first generation technocrates with no financial backing from any industrial house.

• Industrialist such as in case of plus channel that has backing of Kilachand. Hence promoters had to dilute their stake in order to grow.

• Does TV programming for ZEE, STAR, SONY MTV and now for Shri Adhikari Brothers. IPR in respect of such programs belongs to the respective channel.

1. But in return we get stable risk free revenue stream with strong cash flows. Margins in this case are 25 - 40%. Over the years such an arrangement has resulted in strong relationship. Though no assets are created, nevertheless it provides revenues and measures to grow.
2. But now the co. is working in the direction of co-producing contents of such programs in association of aforesaid channels and hence co-owing of IPR of these programs.
3. 49% stake held by the co. in CNBC India (balance 51% being held by CNBC Asia) has improved visibility of the co. besides providing greater financial strength and stability. Therefore lots of intangible advantages to continue to accrue to TV 18.

• TV 18’s balance sheet adequately reflects losses presently incurred by CNBC India.

• TV 18 and CNBC India have been continuously working to extensively bring forth into focus subjects that have business implications.

1. Example - it is going to give detailed coverage and analysis and more particularly from trade and industry angle of scheduled visit of the US President Bill Clinton to India.
2. Besides CNBC India also broadcasts leisure driven programs on Saturdays and Sundays such as golf show.

• Indian program contents on CNBC India on weekdays has been successfully toned up from 2 hours \ day to present 8 hours \ day. This will be further raised to 12 hours \ day in near future.

• Present strength of 300 decoders (mainly installed in Mumbai) will be raised to 3,000 in the next quarter to cover other cities also.

• TV 18 enjoys IR in respect of business news and analysis. Except for 4 TV \ News broadcasting channels – CNN, BBC, STAR and Bloomberg, the co. is free to broadcast its news contents on other non competing channels that are mainly regional in nature.

• While CNBC India owns India programs, contents not broadcasted belongs to TV 18.

1. Say a particular program has coverage of 30 minutes out which 10 minutes worth program has been broadcasted and balance 20 minutes not. The position will be as under –
2. 10 minutes of India program will belong to CNBC India
3. 20 minutes of program will add to TV 18’s library.
4. Internet usage of news will be a great asset.

ARRANGEMENT WITH SONY ENTERTAINMENT TV

• Sony is one of successful channels with very large distribution and hence reach. (Revenue about Rs. 400 - 500 crores)

• It has been appointed as cable distributor and ad sale agent for TV 18.

• Sony will not compete as news channel. Hence no conflict of interest.

• Association with Sony will be of immense help particularly when the co. is planning to raise its decoders strength from the present 300 to 3,000 in the next quarter April - June 2000.

1. Also this will result in an improved bill collection ability to Rs. 20,000 – 25,000 \ month for 3,000 decoders.
2. In first 6 months revenue will be 80% over what the co. had planned to get in the first year.
3. There is minimum guaranteed revenue. TV 18 will continue to be content hub.

EQUITY PARTICIPATION BY SONY

• Sony is interested in taking up stake in CNBC India.

1. Even we are also interested in offering stake to Sony and welcome them as partner in CNBC India but preferably after 1 year period if relationship with them goes on smoothly.

• It is heartening to note that TV 18’s recently launched "bazaar show" on stock market has made lots of women (women day traders) to take interest in it.

• Lots of corporate and market news get break on CNBC India than in press, on reuters, any other TV channel etc.

• TV commissioned programs are risk free. The co. shares revenues with CNBC India only in respect of news programs.

• The whole issue in broadcasting primarily dwells around quality of content. This can be briefly summed up as under –

• Total AD featuring on CNBC India is 8 minutes \ hour. Out of this TV 18 sells 4 minutes \ hour (50%). CNBC Asia markets balance 50% of AD inventory.

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QUESTIONS AND ANSWERS

• Results for Q1 99\2000 (year-end September 1999) has not been published since want to publish US gap adjusted results.

• Working for 99\2000 will be in line with projections. Will in fact better projections. (Revenue Rs. 30 crores. Net profit Rs. 11 crores. EPS Rs. 10)

JV WITH CNBC ASIA

• 4 years is lock in period for JV. CNBC Asia can’t withdraw at all.

• After four years the only reason for CNBC Asia to pull out of JV will be only if it decides to move out doing business in the Asian continent itself. Then only it can walk out of the JV.

1. Even after CNBC Asia withdraws it will make the best of efforts to provide CNBC brand for rest of the world.
2. But in practical life both are exclusive for each other. In that perspective the life of the JV is like in perpetuity.

• The co. has decided to prepare accounts based on US gap as it has ambitious projects under planning in which case the US gap becomes pre-requisite.

1. Even listing on NASDAQ is not ruled out. But this may not take effect immediately.

• Raghav Bahl will go off air slowly in order concentrate on strategic planning etc. The co. is in fact planning to induct new talent to conduct TV shows.

• CNBC India is no. 1 business news channel. In fact others are trying to copy US.

• In portal business there is lots of competition. What we intend to do is to successfully leverage our existing TV programs contents on web \ portal.

1. It will be like successfully transforming financial daily newspaper say economic times (looked upon as brick) to portal. The portal will enable us in converting off- line TV into on-line medium. In addition to lots of database, the portal will be offering much of value added content and personalised and customised services.

AD REVENUE ON CNBC INDIA

• Between December 1999 and February 2000 ad rate has almost doubled up.

• Whereas no. of advertisers has not increased that of bookings has increased.

1. Rate is expected to further increase once additional decoders as planned are in place.

SUBSCRIPTION

• Cable operators don’t pass on full subscription collection. They reach large no. of households but declare less.

1. With nearly 3,000 decoders in place expects to reach 14-15 mln. households covering almost 75% of investment community.
2. In line with present industry standard only 10-15% of actual no. of households are declared by cable operators.
3. Presently has 1 mln. paying households. Alliance with Sony is expected to almost double this within a year.
4. Subscription leakage is gradually reducing with cable operators. This has come down from 100% to 90% to presently 85%. In other words there is 50% increase from 10% to 15%.

REVENUE MODEL OF THE PORTAL

• THREE REVENUE DRIVING AREAS ARE :

1. AD REVENUE
2. SUBSCRIPTION REVENUE
3. TRANSACTION REVENUE FROM CUSTOMISED AND PERSONALISED SPECIAL SERVICES INCLUDING BROKING.

• In short term focussing at subscription based revenue model for the portal.

• Presently there isn’t major scope for transaction based revenue model due to competition.

• CNBC Asia is not investor in the portal. It will not be named after CNBC. TV 18 will provide content.

• DD gives IPR to TV 18. But in that case rates are quite low. In order own IPR we have to first invest in programs and then air it.

1. This will be risky affair also since success of a program depends on its popularity.

STAKE TAKE UP BY SONY

• This will be 20% in CNBC India.

• Will be parted by TV 18 which in turn will get cash. CNBC Asia doesn’t want dilute its 51% stake in CNBC India.

• After the said arrangement, TV 18 with 29% stake in CNBC India will continue to be content provider.

• International rights for CNBC India programs are not with CNBC on any of its sites.

DISCUSSION WITH COMPANY OFFICIALS

• The co. is doing well.

• It will overshoot projected revenue of Rs. 30 crores for 99\2000. Even profitability will also be better.

• The co. is changing auditors to Deloitte Haskins. Will also adopt US gap.

• Time frame to reach Rs. 100 crores subscription revenue pursuant to arrangement with Sony.

• This can’t really be fine-tuned at this moment as a lot depends on cable operators. Still going by present trend one can estimate this at about 2.5 - 3 years. Nevertheless it must be mentioned that things can change in short term also if compliance by cable operators improves.

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BUSINESS PORTAL LAUNCH

• This will be launched very shortly. It will be a vertical portal for business comments.

1. It’s not going to be plain vanilla stuff giving corporate, economy etc. database. As published by CMIE and others.

• It is aimed at making Internet business news station with CNBC India programs on PC. This is so because generally at office one rarely watches TV.

1. Apart from the Indian business and investing community the portal is also aimed at covering NRIS and investment analysts who sitting abroad can get on-line live analysis on net.
2. It will provide real and virtual contents that is of timely relevance.

• The portal will have staggered subscription scheme.

• It will offer high level of customisation \ personalisation through e-mail alerts on user defined criterias. It will also give company research reports, price movement

• Tracking, price tickers etc.

• It will be web enabled to chase you on e-mail.

• Activities related with the portal will be undertaken through separate 100% subsidiary of TV 18.

1. About Rs. 30 - 40 crores will have to be spent on brand building.
2. Initially expects revenue of Rs. 3 - 5 crores from the portal business.

• Presently KPMG is doing valuation of this portal. The subsidiary plans to go for venture capital funding in next quarter to finance cost of brand and contents building of the portal.

1. Will buy a small portion of the portal’s equity.

• Substantially large number of Indians watch TV in general and CNBC India in particular. That community will be driven to look to the portal through specialised events such as availability of infosys results (on-line) on 11-4-2000 (the day of declaration of results) and also Mr. Narayanmurthy will be available on our portal for chat.

• The portal is expected to add value to TV content that has passive viewership.

VENTURE INTO RADIO BROADCASTING

• FM Radio bandwidth is opening up for private participation in India.

• TV 18 will be 50% partner in Vertex Corporation, a co. promoted by Dabur that has applied for FM Radio Licensees.

1. The present ratio of 50:50 can change to 40:40:20 if the present talks with UK based strategic partner for taking up 20% stake in vertex can go through.

• Program development efforts of TV 18 can be conveniently streamlined to even generate contents for fm radio broadcasting.

1. Relatively low cost is involved as same star who is on TV can do something exciting for radio (voice) media.

• Since business model is still being worked out the same will be announced in March \ April 2000.

• Vertex is not bidding very high for FM licensees.

• Radio programs developed for a particular license area keeping specific community in centre can also be advantageously used for broadcasting in other licensed areas serving that community residing in such other areas.

• Results for March 31, 2000 will be US gap adjusted.

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